With the spring market warming up, many people are going to be filling their weekends with house hunting. But if an affordable, move-in-ready space to fall in love with can’t be found, homebuyers shouldn’t avoid fixer-uppers or older homes. With a renovation specific home loan, potential borrowers can combine the purchase price and the improvement costs into the financing in one loan.

At Norcom, we offer several loan options for renovations: FHA 203k, Fannie Mae HomeStyle, and the VA Rehab. Below, we’ll outline what you need to know about each type of loan so you can decide which fits your needs best:

FHA 203k Limited

50% of funds are disbursed at closing

Two Draws (50% at closing and 50% upon completion of work)

If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection

Any changes to the original work order must be submitted to Norcom for approval prior to the work being started

Borrower should not pay for anything out of pocket

Any request for contingency funds must be submitted to Norcom for approval prior to work starting

All items on original work order must be completed prior to any contingency disbursements

A 203k loan cannot be used to pay for work that the FHA deems luxuries (ex. outdoor hot tubs, saunas, barbecue pits)

A 203k loan is for a primary residence and cannot be used for vacation homes or investment properties

Eligible properties include single-family homes, condos in a one-to-four-unit structure, or a qualified manufactured home

The 203k Limited loan caps the cost of renovations to $35,000, however there is no minimum cost of repairs

Work must begin within 30 days of loan closing

All work must be completed within 6 months

FHA 203k Standard

No money will be disbursed at closing

There is a 5-draw limit, which is determined prior to closing

If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection

Norcom requires a progress update every 30 days

Contractors General Liability Insurance must be valid through project completion

Any changes to the original work order must be submitted to Norcom for approval prior to work being done

Borrower should not pay for anything out of pocket

Any request for contingency funds must be submitted to Norcom for approval prior to work starting

All items on original work order must be completed prior to any contingency disbursements

A 203k loan cannot be used to pay for work that the FHA deems luxuries (ex. outdoor hot tubs, saunas, barbecue pits)

A 203k loan is for a primary residence and cannot be used for vacation homes or investment properties

Eligible properties include single-family homes, condos in a one-to-four-unit structure, or a qualified manufactured home

The 203k Standard loan allows for a project costing more than $35,000, however total improvements must cost at least $5,000

Work must begin within 30 days of loan closing

All work must be completed within 6 months

Fannie Mae HomeStyle

No money will be disbursed at closing

There is a 5-draw limit, which is determined prior to closing

If the file has a HUD Consultant, the HUD Consultant will complete the final inspection; If the file does not have a HUD Consultant, the appraiser will complete the final inspection

Norcom requires a progress updated every 30 days

Contractors General Liability Insurance must be valid through project completion

Any changes to the original work order must be submitted to Norcom for approval prior to work being done

Borrower should not pay for anything out of pocket

Any request for contingency funds must be submitted to Norcom for approval prior to work starting

All items on original work order must be completed prior to any contingency disbursements

Can be used to renovate a second home or investment property, if it is an eligible property type

Work must begin within 30 days of loan closing

All work must be completed within 6 months

VA Rehab

Borrower must qualify for a VA loan to be eligible for the VA Rehab loan

100% Financing of purchase price plus improvements

No monthly MI

One closing for purchase and rehabilitation

Maximum improvement cost cannot exceed $35,000

15% Contingency reserve required

All work needs to be completed within 90 days of closing

Contractor must be approved by Norcom Mortgage

Both purchase and refinance options are available

Rehabilitation disbursements are made when work is complete

As a future homebuyer and potential borrower, remember that you have options, especially if you’ve found a house that’s not picture perfect, but the location is exactly what you had in mind. Reach out to our VP of Renovation Loan Programs, Charlie Napolitano to learn more about your renovation loan options.